Retirement ages - another reprieve for employers

Background

UK age discrimination legislation enables employers to dismiss employees at the age of 65 (or a lower age if the employer is able to justify retiring people at below 65) without compensation, provided they have complied with the prescribed retirement procedure.

Heyday has brought proceedings in the UK courts challenging these rules as an incorrect implementation of the EU Directive that prohibits discrimination on grounds of age, religion or belief, sexual orientation and disability. The UK High Court asked the ECJ to answer a number of questions arising out of Heyday’s challenge. These are largely technical arguments that might have helped Heyday establish that certain aspects of UK law were incompatible with the European law.

The ECJ has however made it clear that it will not interfere with the rules on compulsory retirement in the UK legislation, stating that this is an issue for the UK courts to deal with. In its judgment it also gives general guidance to the UK courts as to how they should approach the issue, indicating that if Heyday continues with its legal challenge, the onus will be on the UK Government to show that a compulsory retirement age fulfils a legitimate social policy aim. That in turn will require the Government to explain why it thinks the UK labour market benefits from the retention of a compulsory retirement age and to show that the importance of those benefits outweighs the discriminatory effect on older employees.

The questions the ECJ was asked to consider were as follows:

Heyday objected to a general clause in the UK legislation that provides that a difference of treatment on the grounds of age does not constitute discrimination if the employer can show that it is a proportionate means of achieving a legitimate aim. The Equal Treatment Directive has a similar clause but it lists a number of specific forms of differences of treatment that could be permitted to achieve certain legitimate objectives. Heyday argued that the UK legislation should include a list that states which differences of treatment can be permitted for which legitimate aim. The UK High Court therefore asked the ECJ whether the EU Member States are entitled to introduce legislation which includes a general clause permitting any different treatment on grounds of age if it is a proportionate means of achieving a legitimate aim or whether the Directive requires the Member States to define the kinds of treatment which could be justified to achieve a legitimate aim in a list. The ECJ held that there is no requirement for UK law to include a specific list and a general clause is permissible, subject to the overriding need for the Government to be able to show that any particular measure, such as a default retirement age, meets a legitimate and proportionate aim of social policy.

The High Court also asked the ECJ whether there is any difference between what a Government must show to justify specific exceptions from the prohibition on age discrimination and what must be shown to justify indirect discrimination. The ECJ held that the requirement is the same in each case, in spite of slight differences in the wording of the Directive. That decision will prevent the development of a further, unwelcome layer of complexity in age discrimination law.

The High Court also asked whether mandatory retirement rules actually fall within the scope of the Directive at all. However, after the case was referred, the ECJ gave its ruling in thePalacios de la Villa case which stated, amongst other things, that mandatory retirement rules do fall within the scope of the Directive. The ECJ in Heyday has concurred with that approach.